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Calculate Inventory Using Absorption Costing

Question

DeAnne Company produces a single product. The company's variable costing income statement for August appears below:

DeAnne Company
Income Statement
For the month ended August 31

 

Sales ($20 per unit)

$ 802,000

 
   

Variable expenses:

   

Variable cost of goods sold

521,300

 

Variable selling expense

80,200

 
   

Total variable expenses

601,500

 
   

Contribution margin

200,500

 
   

Fixed expenses:

   

Fixed manufacturing

142,880

 

Fixed selling and administrative

35,720

 
   

Total fixed expenses

178,600

 
   

Net operating income

$ 21,900

 
   

The company produced 35,720 units in August and the beginning inventory consisted of 8,340 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. Under absorption costing, the ending inventory for the month ended August 31 would be reported at:

a. $51,480

b. $75,240

c. $67,320

d. $80,240

 

Summary

The question belongs to Accounting and it discusses about calculation of month end inventory using absorption costing.

Total Word Count 33

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